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Levi’s Reports Loss in Second Quarter

Lagging sales and unfavorable currency exchange rates pushed Levi Strauss & Co. into the red for the second quarter.

Lagging sales and unfavorable currency exchange rates pushed Levi Strauss & Co. into the red for the second quarter.

For the three months ended May 31, the San Francisco-based denim giant reported a loss of $4.1 million compared with earnings of $701,000 in the same period a year ago.

“We continued to face a very challenging global economy in the second quarter,” John Anderson, president and chief executive officer, said during a conference call with analysts. “We posted solid global results in an environment that became increasingly difficult during the quarter.”

Revenues fell 3.4 percent to $904.5 million from $936.3 million. Management said, excluding the impact of foreign currency exchange, revenues would have increased by 5 percent.

Sales slid 3.1 percent to $886.5 million from $915.1 million. Results were buoyed by growth in the Americas, where revenues gained 8.4 percent to $517.5 million from $477.3 million.

Anderson said wholesale performance in mature markets in Europe and Asia continued to soften. European revenues declined 17.4 percent to $221.1 million from $267.7 million, while the Asia-Pacific region saw revenues fall 13.3 percent to $165.9 million from $191.4 million. Anderson noted that Japanese consumers, in particular, made a marked shift toward cheaper goods and fast-fashion options.

“It’s a fundamental change to see the Japan consumer trade down,” said Anderson, adding that the trend has picked up momentum in recent months. “It’s certainly something that’s happened very quickly.”

The company continues to move aggressively on opening its own branded stores. Another 31 units were opened during the quarter, bringing the total number of branded stores up to 323 and accounting for 11 percent of revenues. On Monday, the company said it had completed its $72 million acquisition of 73 Levi’s and Dockers outlets from bankrupt Anchor Blue Retail Group.

For the first half of the year, Levi’s has seen its earnings slashed by more than half, falling 55.1 percent to $43.9 million from $97.8 million. Revenues declined 8.1 percent to $1.86 billion from $2.02 billion.

Sales dropped 8 percent to $1.82 billion from $1.98 billion. Revenues for the Americas fell 3.4 percent to $1.02 billion from $1.06 billion. European revenues declined 18.1 percent to $488.4 million from $596.4 million. Revenues for the Asia-Pacific region fell 5.4 percent to $364.2 million from $365.8 million.

In addition, Levi’s put to rest reports that the company might leave San Francisco. Anderson said Monday a combination of incentives, including a favorable rent from Levi’s landlord and sweeteners from the city such as improving bus service to its headquarters on the edge of downtown, kept Levi’s from leaving the place where the label was founded 156 years ago. The company employs about 1,200 people at its headquarters.

Speaking to reporters after an outdoor news conference with Mayor Gavin Newsom, Anderson said he couldn’t quantify what savings Levi’s might have realized staying in San Francisco versus moving when its lease expired in 2012.

“I was totally open to where we could make a deal,” Anderson said.

The new lease extends through at least 2021.